The financial systems of the world have
collapsed so badly that they have dragged the economies into recession. Many
believe that this is the end of the liberal government system or the
capitalistic economic system.

Once the hub of capitalism, the
America, is now rushing towards saving the indigenous financial sector and that
is going against the capitalistic theory. What are the reasons behind the
collapse? The main reason is consumer financing.

How? Well this is a like a knitted trap
of the shrewd bankers for the end consumers and other financial institutions, in
which they themselves could not survive along with other parties. It's like
earning money for money having no real value in nature.

Bankers lend their money to the buyers
of goods and services and in return they charge heavy interest rates. The
impacts of interest rates are so large that at the end of the payment duration
of the loans bankers actually would earn twice the loaned amount.

Obviously when a buyer gets a thing
thrice its actual value, he would certainly sale it against the inflated value.
This phenomenon triggers inflationary pressures in the market that starts
picking up prices as a result. Finally, it turns the real goods into investment
goods and their values go up like fired rocket.

At initial levels it is good experience
for investors and end consumers both. As the investors earn decent profits while
the consumers enjoy the things which they actually could not. A person having
monthly gross income of Rs. 40,000 could now afford a car and a two bed flat and
on the back of credit card he could buy a good living.

On the other hand, Bankers earn
interest payments at regular installments which they further mortgage as
derivative debt instruments on the regular incoming installments. Their pool of
debts is further sold out for money which they further invest for the same and
other ventures.

All this shapes in real crazy business
when bankers with hell lot of money loan out without making proper risk
assessment of the customers. The default rates pick up and the inflated values
of the goods climb to the north. Everyone starts possessing the loaned
properties which now are actually very costly than actually priced goods in the
market. This has multiplied the default rates.

Now, large investors and financial
institutions have called on their money. Bankers could not reimburse because of
defaults of their customers. Have you noticed the cycle? Now everyone is
becoming insolvent and hence the situation proclaims end of the boom, which has
resulted in the economic meltdown.

This phenomenon has already affected
Pakistan but fortunately considering the precedents in the world and especially
in America Pakistan quickly has changed consumer financing policies.

There are no buyers in the market and
the actual buyers or the investors are extinct. The phenomenon has jeopardized
stock markets that though once were trading average 16000 levels in early 2008
are now trading around 7000 levels.

The phenomenon has stimulated economic
meltdown and hence the Government came to rescue the sagging industries.

The Government intervention with a
large extent is reflective of capital system downfall. The phenomenon of slow or
no growth would continue for some period until new influx of money is put on to
work out a stimulus for new growth.

Actually, today's world crises are very
severe and they have been marching forward for the last two years. The world
economies and especially the American economy are slowly and gradually sliding
down to recession and most of the economists and investors are predicting severe
recession in the American economy this time.

Also, it has been the world's history
that whenever the big economy gets short of resources it goes for war to fish
out resources to maintain status quo. The same is happening in recent time and
now America is looking for another war to shore up its economy with more money
and resources.

The current financial crises have
reinforced the belief that religion has rightly restricted extravaganza and
lavish living. Today's spendthrifts may turn into tomorrow's grief.

As member of tolerant and literate
society we should restrict ourselves to our actual resources and should not
pursue a debt financed lavish living. We should learn from mistakes and
especially from others' mistakes to avoid the grave consequences. Today the need
is to work out the interest free economic system and real economic system. Based
on non-speculation values of goods and services restrict individuals and
investors to available resources by default.